Consumer confidence sees house price hike

Published on Tuesday 8 January 2002 00:00

HOUSE prices in the UK have raced ahead by 2.9 per cent during December as consumer confidence bounced back after the September 11 terrorist attacks, Halifax said today.

Britain’s biggest mortgage lender said prices last month rose at their fastest since October 1999 to bring annual house price inflation to 15.5 per cent for 2001.

But the group warned increases were set to ease during the coming year as both slowing economic growth and rising unemployment took their toll on the market.

The average price of a house in Britain is now 98,885 - well below the recently reported 116,000 for Edinburgh.

Today’s results compare to a 1.9 per cent price rise for December reported by Nationwide last week, bringing annual growth for 2001 to 13.8 per cent.

Gary Styles, head of group economics at Halifax, said: "House price inflation has been very strong in 2001 rising from around three to four per cent at the start of the year to over 15 per cent in December. The housing market has shown remarkable resilience."

He said December’s strong rise largely reflected a revival in consumer confidence.

But he added: "Slowing economic growth and rising unemployment should help to ease house price inflation to more moderate levels over the course of 2002."

December’s increase follows a rise of 2.2 per cent in November, but there was no rise in October and only a 0.1 per cent increase in September as the US terrorist strike hit consumer confidence.

Mr Styles said he expected prices to beginning slowing early this year, with annual growth reaching around five per cent.

John Butler, economist at HSBC, said house prices were "on fire".

He added: "The annual rate of increase is now up from 8.5 per cent in September to 15.5 per cent - the second fastest annual rate of increase since mid-1989."

"The Nationwide measure of house prices is slightly weaker but still showing spectacular rises."

He added that this increase as well as strong retail sales figures for December would raise fears that interest rates would rise in order to "cool the consumer".

But he thought that this was unlikely to happen until much later in the year.